Bendigo and Adelaide Bank (BEN)

Royal Bank of Scotland thinks
Bendigo and Adelaide Bank
’s proposed takeover of Bank of Cyprus Australia is a good deal, but it says the main stories are the dilutive capital raisings and subdued guidance for the first half of fiscal 2012.

Management said first-half net profit would be flat on the previous corresponding period due to tough funding conditions and RBS has accordingly lowered its earnings forecast by 1.8 per cent for fiscal 2012 and 4 per cent for fiscal 2013.

Also, while RBS says Bank of Cyprus Australia is a commercial-biased bank, with strong asset quality and deposit funding share, and the strategic fit with Bendigo and Adelaide looks good, the changes to ownership and branding create attrition risk.

The broker has downgraded the stock from “hold" to “sell", and lowered its price target from $9.32 to $8.07.